Making grants to solve social and environmental problems at home and around the world THE WILLIAM AND FLORA HEWLETT FOUNDATION 2008 Annual Report Forms of Philanthropic Support: The Centrality of Alignment* Paul Brest Nonprofit organizations are the core of civil society. Vibrant organizations require unrestricted capital and need excellent leaders with considerable autonomy to develop and implement their plans. But these organizations and their leaders also depend on funders, who have their own passions, goals, and ideas. How are the interests of donors and nonprofits reconciled in the philanthropic world? Some funders use the power of their purses to resolve the tension in a lopsided way that satisfies their egos but ultimately disserves society. They make small, short-term grants focused on narrowly defined concerns. They require organizations to jump through hoops during the application process, and then micromanage grantees’ activities. In fact, unrestricted, general operating support for organizations accounts for only about 19 percent of all foundation grant dollars.1 Concerned with the pervasive undercapitalization of nonprofit organizations, Independent Sector, Grantmakers for Effective Organizations, and the Nonprofit Finance Fund have strongly advocated that funders provide multi-year, renewable general support.2 At the same time, a small but increasing number of venture philanthropists are providing successful nonprofits the funds necessary to expand.3 Most venture philanthropists support organizations that provide services— education, after-school programs, visits by nurse practitioners. But general support is equally valuable for organizations engaged in research and advocacy, ranging from universities and think tanks to environmental organizations. For all of the value of general support, however, there are often good reasons to fund specific projects. Proponents of unrestricted support tend to be so single-mindedly focused on its benefits that they forget that it is not an end in itself but rather one of a number of tools of philanthropy, useful for some purposes but not others. This essay is premised on the belief—or at least the hope—that if funders better understood the rationales for different forms of philanthropic support, they would behave in a more nuanced way. It argues that the appropriate form of funding depends mainly on the alignment of a funder’s goals and strategies with the grantee’s mission and activities. Alignment is a function of the breadth of a funder’s goals and is also affected by the substance of its goals and the time horizons in which it pursues them. THE WILLIAM AND FLORA HEWLETT FOUNDATION | 2008 ANNUAL REPORT FORMS OF PHILANTHROPIC SUPPORT: THE CENTRALITY OF ALIGNMENT BREADTH OF PHILANTHROPIC GOALS All philanthropy proceeds from a funder’s particular passions and values. At the broadest level of goals—so broad that they might be called concerns or interests—there is no tension between funder and grantee, because it is only after the funder has determined its goals that anyone can know who the grantees might be. Funders interested in the environment, or disadvantaged youth, or the arts will have completely different sets of potential grantees from each other. One can criticize a funder’s choice of concerns from a social or moral point of view, but these are criticisms external to philanthropy and beyond the realm of funder-grantee relations. Different funders may address the same general goal more broadly or narrowly and with different time horizons. For example, a funder concerned with homelessness in the United States may focus on a particular community, or on a region, or on the nation as a whole. The funder may wish to provide direct services to address the plight of people living on the streets today or support long-term systemic change to alleviate the poverty that forces them into the streets. A donor’s choice to define his philanthropic goals broadly or narrowly is not fundamentally different from his choice among specific substantive goals. For example, the motivation that leads a donor to support research into a particular form of cancer is not essentially different from his choice to support research for cancer rather than heart disease, or to support education in Cambodia rather than gamelan ensembles in Indonesia. Even so, one can imagine engaging a donor in a conversation that seeks to help him better understand, and perhaps broaden, his own philanthropic goals. People are sometimes myopic about their goals, focusing on a particular event that triggers interest without connecting it to broader issues. A donor who sees a captivating television show about the plight of the Greater Sage-Grouse may be motivated to protect this particular species rather than broadening his concern to encompass endangered species or the western environment more generally. But at the end of the day, if a donor’s passion is directed toward saving the Greater Sage-Grouse, so be it. The same applies to a philanthropist interested in rehabilitating gang members only in Omaha rather than in Nebraska, the Midwest, or throughout the United States. As we will see, the breadth of a funder’s goals strongly determines the form of its support for a nonprofit organization. ALIGNMENT BETWEEN FUNDERS AND GRANTEES There are two essentially different forms of philanthropic funding. When a foundation provides general support—also known as unrestricted or core support—its funds back the grantee’s entire mission. Alternatively, a foundation may support specific programs or projects carried out by the organization. Here is a simple example: • A funder interested in promoting medical education and research in general might give general operating support to a free-standing research institute or medical school. (A grant to a medical school within a university would not constitute general support, because 2 THE WILLIAM AND FLORA HEWLETT FOUNDATION | 2008 ANNUAL REPORT FORMS OF PHILANTHROPIC SUPPORT: THE CENTRALITY OF ALIGNMENT it would not provide unrestricted support for the institution as a whole—though most universities would be quite pleased to have an unrestricted grant to one of their major schools.) • A funder interested in cancer research might provide project support to a cancer center within a medical school or a medical institute, or provide general support to an institution whose sole mission is cancer research. • A funder interested in supporting research on a particular form of cancer might provide project support for the work of an identified researcher or her research group in one of these institutions. General support is the most effective grantmaking tool when an organization’s mission is essentially identical with, or contained within, the funder’s goals in a field. Clearly, a funder interested in cancer research would greatly dilute its grant by providing general support to a university, which devotes only a tiny fraction of its work to this research. But the funder could achieve its goal through either a project grant or through general support to an institution exclusively devoted to such research. Virtually as a matter of logic, a funder with broadly defined goals is more likely to find institutions whose missions and activities fit within those goals (and thus are appropriate for general support) than a funder whose goals are narrowly defined. To illustrate this point, let’s contrast the Save All Mammals Foundation (Save All) with the Save Marine Mammals Foundation (Save Marine). The large circle in Figure 1 (on the following page) represents the scope of Save All’s concerns; the smaller circles represent potential grantee organizations. Those that are fully within Save All’s circle are eligible for general support; those that intersect the circle are eligible for project support; and the organization entirely outside the circle would receive no support. General Support To be eligible for Save All’s general support, a grantee’s mission and (nearly) all its activities must be directed to saving mammals. In Figure 1, organizations dedicated to saving various marine mammals, American mammals, and wolves all fit fully within the funder’s circle of interest and could receive general support. Project Support Organizations whose activities intersect with Save All’s interests are eligible for project support. The World Ecological Society works on myriad global environmental problems, including water and air pollution, endangered species, and rainforests. It has a small but excellent staff devoted to protecting whales, and Save All might provide project support for this initiative. Protect Marine Ecosystems is concerned with all marine ecosystems, including those necessary to sustain marine mammals. Depending on how much of the organization’s work supports marine mammals’ ecosystems, Save All might provide project support, or it might find the alignment close enough to provide general support. No Support Assuming that sharks play no significant role in any mammal’s ecosystem, Save the Sharks is entirely outside Save All’s concerns, and not a candidate for a grant. 3 FORMS OF PHILANTHROPIC SUPPORT: THE CENTRALITY OF ALIGNMENT Figure 1 Save ALL Mammals Foundation Save the Wolves Save the Whales World Ecological Society Save American Mammals Save the Sea Otters Protect Marine Ecosystems Save the Sea Lions Save the Manatees Save the Sharks Figure 2 Save MARINE Mammals Foundation Save the Wolves World Save the Save the Ecological Whales Sea Otters Society Save American Mammals Save the Save the Sea Lions Manatees Protect Marine Ecosystems Save the Sharks FORMS OF PHILANTHROPIC SUPPORT: THE CENTRALITY OF ALIGNMENT Now consider the more narrowly focused Save Marine Mammals Foundation (Figure 2). Save Marine’s circle of interest is smaller, and therefore fewer organizations are likely to fit fully within it and be eligible for general support. For example, Save the Wolves is not eligible; Save American Mammals (which could get unrestricted support from Save All) might now receive only project support for that portion of its work protecting American marine mammals. The World Ecological Society and Protect Marine Ecosystems are still eligible for project support.